OECD Lowers Spain's GDP Growth Forecast Amid Global Trade Tensions
Spain's GDP growth projection for 2025 has been revised down to 2.4% by the OECD, reflecting rising global instability and trade tensions.
The Spanish economy is experiencing increasing vulnerability to global trade tensions sparked by tariffs implemented during the Trump administration.
The Organisation for Economic Co-operation and Development (OECD) has revised its GDP growth forecasts for Spain, announcing a decrease of two-tenths for both 2025 and 2026. According to the latest Economic Outlook report released, Spain's growth is expected to reach 2.4% in 2025 and 1.9% in 2026, compared to previous estimates of 2.6% and 2.1%, respectively.
This downward revision mirrors global trends, with the OECD also adjusting its predictions for worldwide economic growth from 3.1% to 2.9% for 2025, and maintaining the 2.9% forecast for 2026.
In particular, the forecast for the United States has seen a significant revision, with GDP growth expectations for 2023 cut by six-tenths from 2.2% to 1.6%, and a minor adjustment for 2026 from 1.6% to 1.5%.
Conversely, the OECD has kept its growth predictions for the Eurozone stable since March, projecting a 1% growth rate for 2025 and 1.2% for 2026. Within the region, Germany's growth estimate remains unchanged at 0.4% for 2025, whereas Italy's forecast experienced a slight reduction to 0.6%, and France's estimate was decreased by two-tenths to the same figure.
The OECD has emerged as the first major international body to lower Spain's GDP figures amidst the prevailing global uncertainty.
In contrast, the International Monetary Fund (IMF) had raised its 2025 growth projection for Spain by two-tenths to 2.5% in its April report.
On the national level, Spain’s Independent Authority for Fiscal Responsibility (AIREF) had previously adjusted its GDP growth forecasts downward on May 14, predicting a 2.3% growth for 2025 and 1.7% for 2026, reflecting reductions of two and three-tenths respectively.
The current Spanish government continues to maintain its growth outlook, asserting that rising private consumption will counterbalance the potential slowdown in foreign trade due to international uncertainties.
Presently, the government anticipates a growth rate of 2.6% for this year and 2.2% for next year.
The Bank of Spain is expected to release its updated forecasts in the coming days and has already indicated that uncertainty stemming from tariffs might reduce GDP growth by up to three-tenths over the next three years.
Nonetheless, it remains to be seen whether this will result in revisions to the previous growth projection of 2.7% from March.
In its review of the Spanish economy, the OECD notes that while GDP growth will remain robust, it is forecasted to moderate gradually.
Growth is expected to be driven by domestic demand, supported by a solid labor market, rising real incomes, and significant household savings.
The OECD projects that Spain's unemployment rate will decrease from 11.3% in 2024 to 10.7% in 2025, and further down to 10.1% in 2026. These figures represent improvements from the earlier report, where unemployment estimates for 2024 and 2025 were set at 10.9% and 10.5%, respectively.
Additionally, the OECD emphasizes that disbursements from recovery funds and lower interest rates will bolster investment in Spain.
However, it cautions that delays in fund execution and tightening global financial conditions could constrain recovery efforts.
The organization expects that export growth will decelerate due to weakening demand from key trading partners and announced tariffs from the United States.
Although Spain is less impacted in certain sectors compared to other EU countries, its exports of machinery and agro-food products may still face adverse effects.
Regarding inflation, the OECD forecasts a decrease from 2.9% in 2024 to 2.4% in 2025, followed by a further decline to 1.9% in 2026. However, it warns that risks to this forecast are elevated, particularly due to escalating geopolitical and trade tensions that could curtail external demand, increase uncertainty, and delay investments related to recovery funds.
The OECD estimates that Spain's deficit will close at 2.8% in 2025, down from 3.2% in 2024, further decreasing to 2.3% by 2026, attributed to a slight fiscal consolidation.
The organization stresses that the consolidation is underpinned by higher revenues, while the reduction in expenditures reflects the phasing out of crisis-related support measures.
Despite the positive indicators, the OECD maintains that continuing consolidation is essential to place public debt on a declining trajectory, comply with EU fiscal rules, and address increasing spending pressures from an aging population and ecological transitions.
It reiterates recurrent recommendations for Spain, including a gradual increase in VAT, heightened green taxation, and improvements in public spending, alongside calls to reduce barriers to entry in the services sector, rationalize regulation across administrative levels, and expedite public-private partnerships in European funds.
The Organisation for Economic Co-operation and Development (OECD) has revised its GDP growth forecasts for Spain, announcing a decrease of two-tenths for both 2025 and 2026. According to the latest Economic Outlook report released, Spain's growth is expected to reach 2.4% in 2025 and 1.9% in 2026, compared to previous estimates of 2.6% and 2.1%, respectively.
This downward revision mirrors global trends, with the OECD also adjusting its predictions for worldwide economic growth from 3.1% to 2.9% for 2025, and maintaining the 2.9% forecast for 2026.
In particular, the forecast for the United States has seen a significant revision, with GDP growth expectations for 2023 cut by six-tenths from 2.2% to 1.6%, and a minor adjustment for 2026 from 1.6% to 1.5%.
Conversely, the OECD has kept its growth predictions for the Eurozone stable since March, projecting a 1% growth rate for 2025 and 1.2% for 2026. Within the region, Germany's growth estimate remains unchanged at 0.4% for 2025, whereas Italy's forecast experienced a slight reduction to 0.6%, and France's estimate was decreased by two-tenths to the same figure.
The OECD has emerged as the first major international body to lower Spain's GDP figures amidst the prevailing global uncertainty.
In contrast, the International Monetary Fund (IMF) had raised its 2025 growth projection for Spain by two-tenths to 2.5% in its April report.
On the national level, Spain’s Independent Authority for Fiscal Responsibility (AIREF) had previously adjusted its GDP growth forecasts downward on May 14, predicting a 2.3% growth for 2025 and 1.7% for 2026, reflecting reductions of two and three-tenths respectively.
The current Spanish government continues to maintain its growth outlook, asserting that rising private consumption will counterbalance the potential slowdown in foreign trade due to international uncertainties.
Presently, the government anticipates a growth rate of 2.6% for this year and 2.2% for next year.
The Bank of Spain is expected to release its updated forecasts in the coming days and has already indicated that uncertainty stemming from tariffs might reduce GDP growth by up to three-tenths over the next three years.
Nonetheless, it remains to be seen whether this will result in revisions to the previous growth projection of 2.7% from March.
In its review of the Spanish economy, the OECD notes that while GDP growth will remain robust, it is forecasted to moderate gradually.
Growth is expected to be driven by domestic demand, supported by a solid labor market, rising real incomes, and significant household savings.
The OECD projects that Spain's unemployment rate will decrease from 11.3% in 2024 to 10.7% in 2025, and further down to 10.1% in 2026. These figures represent improvements from the earlier report, where unemployment estimates for 2024 and 2025 were set at 10.9% and 10.5%, respectively.
Additionally, the OECD emphasizes that disbursements from recovery funds and lower interest rates will bolster investment in Spain.
However, it cautions that delays in fund execution and tightening global financial conditions could constrain recovery efforts.
The organization expects that export growth will decelerate due to weakening demand from key trading partners and announced tariffs from the United States.
Although Spain is less impacted in certain sectors compared to other EU countries, its exports of machinery and agro-food products may still face adverse effects.
Regarding inflation, the OECD forecasts a decrease from 2.9% in 2024 to 2.4% in 2025, followed by a further decline to 1.9% in 2026. However, it warns that risks to this forecast are elevated, particularly due to escalating geopolitical and trade tensions that could curtail external demand, increase uncertainty, and delay investments related to recovery funds.
The OECD estimates that Spain's deficit will close at 2.8% in 2025, down from 3.2% in 2024, further decreasing to 2.3% by 2026, attributed to a slight fiscal consolidation.
The organization stresses that the consolidation is underpinned by higher revenues, while the reduction in expenditures reflects the phasing out of crisis-related support measures.
Despite the positive indicators, the OECD maintains that continuing consolidation is essential to place public debt on a declining trajectory, comply with EU fiscal rules, and address increasing spending pressures from an aging population and ecological transitions.
It reiterates recurrent recommendations for Spain, including a gradual increase in VAT, heightened green taxation, and improvements in public spending, alongside calls to reduce barriers to entry in the services sector, rationalize regulation across administrative levels, and expedite public-private partnerships in European funds.
Translation:
Translated by AI
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